Antitrust In The News This Week
This week, we take a look at some recent happenings surrounding the proposed Comcast-Time Warner merger, and explore some arguments for and against.
Late last week, the FCC said it was stopping the “shot-clock” on its review of the Comcast-Time Warner merger, informally limited to 180 days. Public comments will now be received until October 29th. The FCC pointed to incomplete answers from Comcast and Time Warner in their submissions as a reason for the day, along with confusion about how to deal with the confidentiality of some agreements.
Time Warner Cable shareholders voted to approve the deal this week , leaving regulatory approval as the last remaining hurdle to the deal. Regulators from the Department of Justice, the FCC, and various state regulatory authorities, including those in California and New York are currently reviewing the proposal. Officials in New York recently pushed back their scheduled vote on the merger to November 13 after finding “deficiencies” with the proposal.
With the merger likely to be in the news for some time, here is a general and of course by no means comprehensive overview of some of the arguments for and against.
Geoffrey Manne at Truth on the Market lays out a number of arguments in favor of the merger. Manne points out that even now, Comcast and Time Warner “don’t compete directly for subscribers in any relevant market.” Moreover, even post-merger, Manne argues that Comcast will not be able, and will not want, to foreclose competition.
Fundamentally, Comcast benefits from providing its users access to edge providers, and it would harm itself if it were to constrain access to these providers. Foreclosure effects would be limited, even if they did arise. On a national level, the combined firm would have only about 40 percent of broadband customers, at most (and considerably less if wireless broadband is included in the market).
Finally, the companies argue that the merger will promote efficiencies and thus encourage continued improvements in quality and service.
A 2009 paper from Adam Thierer may also provide some reason to be cautious about giving too much weight to anti-merger claims. In the paper, Thierer collects some “apocalyptic predictions” made about big media mergers in the past, including AOL-Time Warner, NewsCorp-DirecTV, and Sirius-XM. In his conclusion Thierer writes:
The point here is not that media mergers are inherently good or always make sense. Indeed, as the examples discussed above illustrate, mergers sometimes prove to be huge blunders.But the hysteria sometimes heard before media mergers are consummated rarely bears any relationship to reality once the deals move forward. Media markets are extremely dynamic and prone to disruptive change and technological leap-frogging. Mergers are often one response to that turbulence.
At Vox, Timothy B. Lee concedes that Comcast and Time Warner’s service areas do not overlap in the traditional cable market. However, this is not the only market the two operate in.
[Cable companies] also negotiate with network owners and content providers on the “back end” of their networks. And here size has a huge — and problematic — impact on the competitiveness of the market.
Allowing a merger might therefore give Comcast too much power in negotiations with Netflix or other content companies, diluting the bargaining position of those companies.
The American Antitrust Institute also argues the merger should be blocked. In a white paper, the AAI–contra Geoffrey Manne–argues that the merger would actually increase Comcast’s ability and incentive to exclude its rivals. As for alleged efficiencies, the paper notes that for efficiencies to be cognizable under the Horizontal Merger Guidelines, they must be merger specific and not vague or speculative. If Comcast has already achieved efficiencies and already touts itself as an innovator, this seems to undermine claims that these efficiencies are merger specific. In something of a twist, the AAI cites Thierer’s 2009 paper in an effort to rebut a pro-merger argument. If a Comcast-Time Warner merger might turn out to be a “huge blunder,” is that not all the more reason to be suspicious of supposed efficiencies?
At this point, analysts expect the merger to be approved, likely with conditions, though there is enough to make it a “closer call” than some previous mergers.